Effects Of Listed Company's Intitutional Investors On Corporate Governance

Since 1990s, academics and practitioners have noticed the universal existence of controlling shareholders and the principle-agent relationship of controlling shareholders'entrenchment on minority shareholders. Under the system background , the company's internal governance mechanisms such as independent directors,board of Supervisors and the external governance mechanisms such as manager market , takeover mechanism can not act effectively. Meanwhile, in mature market of European countries and America, institutional investors have become the protagonist in capital market , and investors shareholder activism has become the main governance mechanism. Chinese regulators put forward a series of policies and regulations to develop and cultivate the institutional investors for the hope of improving corporate governance and promoting the development of capital market .In China , because of the government's support , along with the rapid development of the capital market, institutional investors have been developing rapidly both in the number and in the scale. By the end of 2008, institutional investors held 53.4 million shares of stock market in the current market which comprises 54.62% of the circulative share. Could institutional investors weaken the controlling shareholder"tunnelling behavior"? Is it possible to protect the interests of minority shareholders? What are the economic consequences of developing institutional investors? Based on the above consideration, based on the existing systems in China, this paper explores the economic consequences of the institutional investors through theoretical analysis and empirical research.This paper includes nine chapters. Chapter one puts forward the research question, the research significance, the research content and the method, and the key conception definition involved in the paper; Chapter two discusses on theoretic basis of institutional investors'participation in corporate governance and review on representative literature. Then it explores the economic consequence of institutional investors from two threads, one is the result on minor investors protection, the other is the result on enterprise value. The third chapter is about system background, reviewing and analyzing the research background and system factors related to the theme, and analyzing the process of institutional investors development and formal constraints. The fourth chapter indicates the mechanism of institutional investors' participation in corporate governance through theoretic analysis. The fifth and sixth chapters empirically test the effect of institutional investors on corporate operating decision, and find that institutional investors can weaken controlling shareholder's tunnelling behavior. The seventh chapter empirically tests the effect of institutional investors on corporate cost of equity. The eighth chapter empirically tests the effect of institutional investors on corporate value. Finally in chapter nine, we summarize the main results, and put forward the weakness and further research points of research. The main contributions are embodied in the followings:Firstly, based on highly equity centralized and big shareholder control system background of the listed companies in China, this paper discusses institutional investors'weakening controlling shareholders tunnelling behavior. And find out institutional investors play an active role and curb controlling shareholders'deprive of the interests of minority shareholders and promote enterprise's value.Secondly , it extends the economic consequences research of developing institutional investors. Different from the previous research discussing the influence of institution investors mechanism from value angle only, this paper studies the economic consequences based on the controlling shareholder and small investors of agency problems background from equity financing cost angle as well as value angle using the unbalanced panel data .It reveals that the Chinese institutional investors affect the strategy and business decisions of company and protect minority investors interests'.And it also discovers a path about how institutional investor participate in corporate governance.Thirdly, the empirical test results, in given system background, provide evidence of institutional investors economic consequence, which has policy meaning on how to develop and regulate institutional investors.